Luxleaks ups momentum for EU public register of company owners

Judith Sargentini with the "Russian dolls" of the One campaign for a public register of company owners. The dolls highlight how shell companies often reveal another smaller shell company. [One/Twitter]

The Luxleaks tax scandal has upped pressure on national governments to back an EU-wide public register of company owners and trusts, as part of a revised Anti-Money Laundering Directive, the lead MEP on the bill has said.

Judith Sargentini, the Green “rapporteur” on the text, said the revelations over Luxembourg’s industrial scale tax avoidance could encourage countries opposed to the register to change their minds.

She was speaking at an event organised by NGOs to call on the Parliament to stay firm on the register during trilogue negotiations with the Council of Ministers.

Supporters at the event – including Oxfam International, Transparency International, the Financial Transparency Coalition, One, and the European Network on Debt and Development – argue a public register will become a vital tool in the fight against multinational tax avoidance. The register was introduced by MEPS as an amendment to the bill.

European Commission President Jean-Claude Juncker has come under pressure because he was Luxembourg’s prime minister at the time when the Luxleaks deals were made. His Commission is investigating Luxembourg over its tax policy.

At the event, Vitaliy Shabunin, the head of board of Ukraine’s Anti-corruption Action Centre in Ukraine, told EURACTIV that the Luxleaks scandal had the potential to damage Ukrainian trust in the EU.

Portuguese Socialist Ana Gomes, chairing last week’s event in the Parliament, said the controversy could force Juncker to bring in lasting reform on tax issues.

“It’s now or never, especially because of this pressure. That’s why I am against calls for him to resign […] if you want to go after a poacher, you hire a poacher,” she said.

Trilogues

MEPs and Council officials are meeting today (25 November) in Strasbourg to continue those talks. Both sides must agree an identical text before it becomes law. The European Commission sits in on the talks.

The negotiation will likely involve issues surrounding the definition of high risk gambling in the context of money laundering, and data protection.

But Sargentini stressed that everything was still up for discussion, including the register.

“Luxleaks has put tax issues into the spotlight,” she said, “I think that will convince member states who are against the register to try and find a way forward.”

The Luxembourg tax leaks earlier this month exposed how the Duchy cut deals with global companies, allowing them to save billions on tax bills.

Aggressive tax planning, where corporations move money around their subsidiaries in different countries to legally minimise their payments, was already high on the agenda of policymakers keen to raise much needed revenue after the financial crisis.

Sweden had already changed its position to being in favour of the register, Sargentini said. Denmark also supports the initiative.

The Dutch government is against the register, despite the Dutch parliament calling for one in a vote. Sargentini said that the Parliament was “ashamed” after it was revealed that the son of former Ukraine President Viktor Yanukovich had stashed money in a Dutch shell company based in The Hague. Malaysian Airlines Flight 17 was shot down by Moscow-backed rebels in Ukraine, killing 198 Dutch nationals.

The UK backs a register for companies, but not for trusts. A British diplomat at the event hinted that the British could today put forward “new language” in a bid to win a compromise deal.

Ukraine

The Anti-corruption Action Centre in Ukraine ran a website exposing Yanukovich’s opulent palace, and use of shell companies in the EU.

Vitaliy Shabunin told delegates that Ukraine had introduced its own public register of beneficial owners and called for an EU public register of real estate assets as well.

“The key instrument of corruption in Ukraine is the anonymity of companies […] but without open registers in the EU, our register makes no sense,” he warned.

EURACTIV asked Shabunin if Juncker continuing as Commission president after LuxLeaks could damage Ukrainian perceptions of the EU.

“At the moment, we now have an image of Europe as a place where everybody obeys the law, and everybody is equal. That helps us to advocate for the European future of Ukraine,” he said.

“If everybody in the Ukraine would understand the challenges that the EU is facing inside, then it would be a really big problem for European integration – especially if the challenge was in the area of anti-corruption.”

Sebastian Fiedler, vice chair of the Bund Deutscher Kriminalbeamter (German police association), was also at the event. He added that the EU-wide register would also be a vital tool for fighting money laundering and organised crime.

Juncker faces a Parliament vote of censure over the scandal on Thursday. Yesterday, he was supported in the Parliament by the two largest political groups, the European People’s Party and the Socialists & Democrats, as well as the liberal ALDE group.

The motion was brought by parties including the UK Independence Party and France’s National Front.

Background

More than 300 companies, including PepsiCo Inc, AIG Inc and Deutsche Bank AG, secured secret deals from Luxembourg to slash their tax bills, the International Consortium of Investigative Journalists (ICIJ) reported on 5 November, quoting leaked documents. Commission President Jean-Claude Juncker was prime minister of Luxembourg from 1995-2013.

The companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, the group of investigative journalists said, based on a review of nearly 28,000 pages of confidential documents.

The spread of international terrorism over the last 15 years has prompted a global tightening against money laundering activities which are often crucial to provide funding for terrorist activities.

The Financial Action Task Force, an inter-governmental body representing rich nations around the world, adopted in February 2012 new standards against money laundering and terrorism financing.

The new standards were turned into a legislative proposal by the European Commission in February 2013. MEPs introduced an amendment to the bill calling for an EU wide public register of company owners and trust holders, which supporters argue is vital for fighting multinational tax avoidance.